All through life, there are many times you will come across the word ‘Rate’. Whether it’s interest rate, growth rate, discount rate ……e.t.c. Accountants know about more complicated rates.
There are different formulas an methods of calculating these rates. But what is Rate? And why is rate calculated?
What is Rate?
Rate is the speed at which something happens or changes compared to the original state over a period of time.
From the definition, it’s obvious that rate it time sensitive. It also involves the state of something compared to the state at a different time.
To calculate rate, there are different formulas and different types of rate. Rate is expressed as a percentage. Change is just change but when expressed as a percentage, it becomes Rate of change.
There are many articles on this blog describing with illustrations how to calculate different types of Rates.